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Mortgage Companies Agree to $8.5 Billion Settlement With Government

Ten different mortgage servicers, including many of the largest banks in the U.S., agreed to terms with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board on Monday to settle claims regarding foreclosure processing and mortgage loan servicing for $8.5 billion.

The agreement punishes "deficient practices" in loan servicing and foreclosure processing. The terms include $3.3 billion in total cash payments to nearly 4 million borrowers who saw their homes foreclosed upon in 2009 and 2010. The remaining $5.2 billion will be administered in the form of "loan modifications and forgiveness of deficiency judgments," according to the OCC.

Some of the offending banks issued statements today declaring their respective shares of the financial obligations.

Citigroup announced that its share would be reflected by a $305 million charge to its fourth-quarter pre-tax earnings, while the remaining $500 million in foreclosure-related debts were covered by existing loan loss reserves. US Bancorp said it would take an $80 million pre-tax hit to fourth-quarter earnings, as well as $128 million in loan modification charges which were covered by loan loss reserves.

Borrowers eligible for remuneration will be contacted by the end of March, and will receive anywhere from hundred dollars to $125,000, depending on the situation, according to the OCC.

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I recieved a letter stating I was eligible for a mortgage loan modification from Bank of America This would have dropped my interest rate by appx 3% saving me appx $56,000. over the remaining loan. I sent all the info they asked for. Then I was told I did not qualify because my debt to income ratio is too high. This does not make any sense to me. Why would I have to requalify for a modification of my existing loan. I have been paying on time for this same loan for the last 7 years. Just sounds like to me they didn't want to loose the money. Is this legal?